Nov. 15 (Bloomberg) -- The world’s biggest greenhouse gas
offset market may attract criticism because it’s failing to
boost sustainable development, while extending the life of dirty
industries, said the University of East Anglia.

The United Nations-overseen Clean Development Mechanism
“could become a ‘rich man’s club’ of project developers,
emissions verifiers and government officials, in roles that
overlap and rotate so frequently that any notion of independence
and transparency is tested to the limit,” according to the
report, which was funded by the U.K. government-backed Economic
and Social Research Council.

Corporations including Mumbai-based Tata Steel Ltd. have
used the CDM “to prop up existing investments in fossil
fuels,” the UEA and the University of Sussex in England, which
carried out research, said in the report. The market needs
stronger international and local governance from independent and
credible institutions to address corruption, they said.

“Support to fossil-fuel industries is not an appropriate
use of CDM finance when projects with strong environmental and
social credentials are vying for attention,” they said.

Projects should be made to meet the sustainable development
targets in their documentation written when applying for
credits, said Peter Newell, a professor at the School of Global
Studies at the University of Sussex, who helped write the
report.

‘Withhold a Portion’

Where there is a risk the projects aren’t meeting
sustainable development criteria, the Bonn-based CDM executive
board, regulator of the program, could “withhold a fixed
portion of credits, perhaps in the range of 10 percent to 15
percent,” Newell said. That would help make sure that revenue
from selling credits helps make poor-nation economies less
carbon intensive, he said.

UN CER credits dropped to a record 6.35 euros ($8.59) a
metric ton on Nov. 3 as a French-German split over Europe’s
rescue strategy emerged before a meeting in Brussels to craft a
solution to the region’s sovereign-debt crisis. EU factories and
power stations provide most demand for the credits. CERs for
December rose 1.3 percent today to 7.03 euros a ton on the ICE
Futures Europe exchange.